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ConceptuaL Framework and Accounting Standards > Development of Financial Reporting Framework and Standard-Setting Bodies > Flashcards

Development of Financial Reporting Framework and Standard-Setting Bodies Flashcards

The Need for Financial Reporting

1
Q

Sets out the concepts that underlie the preparation and presentation of financial statements for external users

A

The Conceptual Framework

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2
Q

*The Conceptual Framework is not a PFRS. When there is a conflict between the Conceptual Framework and a PFRS, the PFRS will prevail.

  • In the absence of a standard, management shall consider the
    Conceptual Framework in making its judgment in developing and applying an accounting policy that results in information that is relevant and reliable.
  • The Conceptual Framework is concerned with general-purpose
    financial statements
A

Authoritative Status and Applicability

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3
Q

The process of consolidating financial information to make it clear and understandable for all stakeholders and shareholders.

A

Accounting

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4
Q

The main goal is to record and report a company’s financial
transactions, financial performance, and cash flows.

A

Purpose of Accounting

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5
Q
  1. Keeps a record of business transactions
  2. Facilitates decision-making for management
  3. Communicates results
  4. Meets legal requirements
A

Importance of Accounting

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6
Q

An accounting process that communicates financial data to external and internal stakeholders, such as
shareholders, lenders and senior company management.

A

Financial Reporting

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7
Q
  • Financial reporting and its components tell a story about a company’s financial health. The information in the financial
    reporting packages must conform to the Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).
  • this conformity provides reliability and consistency
A

Importance of Financial Reporting

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8
Q

Financial Reporting is vital for the following four purposes

A
  1. Raising capitals.
  2. Reassurance
  3. Financial Analysis
  4. Compliance and law
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9
Q

A company’s financial story is especially important when the
company is looking to raise capital, whether through public markets, private investments or loans. Outside parties use financial reports to assess creditworthiness and the strength of the company’s operations.

A

Raising Capitals

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10
Q

While most financial reporting is retrospective, investors, partners and even customers/suppliers can also use it to form predictive opinions regarding future performance and viability. For example, suppliers might use a company’s financial reporting to determine whether to start doing business together, based on the trajectory of
the company’s sales.

A

Reassurance

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11
Q

Financial reporting is also indispensable to internal management, serving as a foundation for analyzing operations, measuring KPIs or
even calculating compensation for employees.

A

Financial Analysis

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12
Q

Financial reporting is also important because it satisfies compliance requirements and laws. Most companies have at least one stakeholder whose continuing involvement requires periodic financial reporting. For public companies, that could be the SEC. Private companies might have a loan that requires periodic reporting of certain debt covenants. Beyond that, financial reporting is legally required by the Internal Revenue Service (IRS) — every US business’s “universal stakeholder.

A

Compliance and law

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13
Q

To provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.

A

The objective of general-purpose financial reporting

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14
Q

to show the results of the stewardship of
management.

A

A secondary objective of
financial statements

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15
Q

forms the foundation of the Conceptual Framework. Other aspects of the Conceptual Framework flow logically from the objective.

A

The objective of general-purpose financial reporting

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16
Q

Those to whom general purpose financial reports are directed:
a. Existing and potential investors
b. Lenders and other creditors.

A

Primary Users

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17
Q

STATEMENT MEANING:

  • Only the common needs of primary users are met by the financial statements.
A

This statement suggests that financial statements, such as financial reports or statements prepared by a company, primarily address the basic or common needs of the primary users. These primary users typically include investors, creditors, and other stakeholders who rely on the financial information to make decisions about the entity.

In essence, it means that these statements are designed to provide a broad overview of the financial health and performance of the entity, catering to the general information requirements of the primary users. However, it might not address specific or detailed needs of every individual user, as those needs can vary widely depending on their specific interests or roles. Therefore, users with more specialized or detailed information requirements might need to seek additional, more tailored reports or disclosures to fulfill their needs.

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18
Q

Main Branches of Accounting

A
  1. Financial accounting
  2. Cost accounting
  3. Management accounting
  4. Tax accounting
  5. Auditing
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19
Q

recording and clarifying business transactions
and preparing financial statements

A

Financial Accounting

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20
Q

tracking and analyzing the costs of production and
operations

A

Cost Accounting

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21
Q

providing information to a company’s internal structure for decision making and planning

A

Management Accounting

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22
Q

preparing and filing tax returns and complying with
tax laws

A

Tax Accounting

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23
Q

examining and verifying the accuracy and reliability of
financial records

A

Auditing

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24
Q
  • To ensure uniformity in financial statements across firms so that
    investors can understand them easily and clearly and can take
    appropriate decisions about the investment.
  • Accounting reports will significantly lose credibility if a company
    reports different profit amount in different counties for a given
    transactions.
  • To enable anyone to explore career opportunities in accounting in any
    part of the world.
  • To improve the transparency and comparability of financial reporting
    in all countries.
  • To ensure that organizations report their assets and transactions in an
    understandable way.
  • To provide a uniform method of reporting for all institutions.
A

Need For International Accounting Standards

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25
Q

IASC

A

International Accounting Standards Committee

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26
Q

The following international bodies publicly urged accountants to adopt a single set of global accounting standards.

A
  1. World Bank
  2. International Monetary Fund
  3. International Organization of Securities Commission
  4. Organization of Economic Cooperation Development
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27
Q

Formed in 1973 to develop global accounting standards

A

International Accounting Standards Committee (IASC)

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28
Q

Issued 41 International Accounting Standards (IASs)

A

International Accounting Standards Committee (IASC)

29
Q

IASB

A

International Accounting
Standards Board

30
Q

Replaced the IASC in 2001

A

International Accounting
Standards Board (IASB)

31
Q

to develop a single set of high-quality, understandable, and enforceable global accounting standards to and other users make economic decisions.

A

The IASB’s main objective

32
Q

has revised many IASs and has issued new standards of its own

A

International Financial Reporting Standards (IFRS)

33
Q

IASB has no authority to require _______ with its accounting
standards.

A

compliance

34
Q

The IASB structure

A
  • the IASC Foundation is an independent organization having two main
    bodies,
    the Trustees and the IASB,
    Standards Advisory Council and the International Financial
    Reporting Interpretations Committee
35
Q

is an independent organization having two main bodies

A

the IASC Foundation

36
Q

the IASC Foundation is an independent organization having two main bodies:

A
  • the Trustees and the IASB,
  • Standards Advisory Council and the International Financial
    Reporting Interpretations Committee
37
Q

The International Financial Reporting Standards Foundation or the IFRS Foundation, is a not-for _____ international organization responsible for developing a single set of high-quality global accounting standards, known as the ______ Standards

A

profit ; IFRS

38
Q

Three-tier governance structure

A
  1. Public Accountability (IFRS Foundation Monitoring Board)
  2. Governance (IFRS Foundation Trustees)
  3. Independent standard - setting (IASB : IFRIC)
39
Q

A group of capital market authorities responsible for setting the form and content of financial reporting.

  1. World Bank
  2. International Monetary Fund
  3. International Organization of Securities Commission
  4. Organization of Economic Cooperation Development
A

IFRS Foundation Monitoring Board

40
Q

A group of capital market authorities responsible for setting the form and content of financial reporting.

A
  1. World Bank
  2. International Monetary Fund
  3. International Organization of Securities Commission
  4. Organization of Economic Cooperation Development
41
Q

These capital market authorities are the regulators of the industries under their jurisdictions. They come from different parts of the world to represent and carry out their own mandates regarding investor protection, market integrity and capital formation.

A

IFRS Foundation Monitoring Board

42
Q

Their purpose is to provide a formal link between the Trustees and public authorities in order to enhance the public accountability of the
IFRS Foundation.

A

IFRS Foundation Monitoring Board

43
Q

responsible for the governance and oversight of the IASB, including the Constitution and due process for the development of the accounting standards.

A

IFRS Foundation Trustees

44
Q

Each Trustee is expected to have an understanding of, and be sensitive to, international issues relevant to the success of the IASB in its development of IFRS Standards

A

IFRS Foundation Trustees

45
Q

is an independent group of professionals with recent practical experience in setting accounting standards, in financial reporting and in
the accounting education.

A

International Accounting Standards Board (IASB)

46
Q

is a standard-setting body composed of its board members. The board
members develop and publish International Financial Reporting Standards (IFRS), a single set of high-quality, understandable, enforceable and globally accepted accounting standards. The IFRS
contains all the accounting standards that a company must follow in preparing and presenting its financial statements.

A

International Accounting Standards Board (IASB)

47
Q

is the interpretative body of the IASB, which works with the Board in supporting the application of IFRS Standards.

A

International Financial Reporting Interpretations Committee
(IFRIC)

48
Q

If somebody raises a question on the application of a Standard, the Committee responds to this question with the help of the Board. The
Committee also does other work at the request of the Board.

A

International Financial Reporting Interpretations Committee
(IFRIC)

49
Q

to assist the Board of Accountancy (BOA) in carrying out its power and function to issue accounting standards in the Philippines.

A

The function of the FRSC

50
Q

carries on the decision made by the Accounting Standards
Council (ASC), its predecessor, to converge Philippine Financial
Reporting Standards (PFRS) with the IFRS Standards issued by the IASB.

A

FRSC (Philippine Financial
Reporting Standards Council)

51
Q

The Philippines comply with the ______ Standards. However, adoption of these international accounting standards in the Philippines still
undergo a process.

A

IFRS

52
Q
  • When the IASB releases exposure drafts of IFRS proposals, the FRSC
    invites ________ to comment on these.
  • When the IFRS Standard is finally published, the FRSC adopts it as a ________.
A
  • local experts
  • Philippine Financial Reporting Standard (PFRS).
53
Q

Philippines’s version of the International Financial Reporting Interpretations Committee (IFRIC)

A

Philippine Interpretations Committee

54
Q

The IFRS Standards and issuances of the IFRIC, when finalized, are adopted by the FRSC and the PIC.

A

Philippine Interpretations Committee

55
Q

These are submitted to the BOA and PRC for approval.

A

Philippine Interpretations Committee

56
Q

has full discretion in developing and pursuing the technical
agenda for setting accounting standards in the Philippines.

A

FRSC

57
Q

The FRSC has full discretion in developing and pursuing the technical agenda for setting accounting standards in the Philippines. Financial
support is received principally from the Philippine Institute of Certified Public Accountants Foundation, Inc. (PICPA Foundation)

A

Philippine Interpretations Committee

58
Q

is formed under the supervision and administrative control of the Professional Regulation Commission (PRC)

A

The Professional Regulatory
Board of Accountancy

59
Q

is composed of a chairman and six members appointed by
the President of the Philippines. From the six members, one is elected as the Vice Chairman.

A

The Board

60
Q

were appointed from a list of
recommendations by the PRC and from a list of nominees submitted by the Philippine Institute of Certified Public Accountants (PICPA).

A

The members of the Board

61
Q

to regulate the practice of accounting profession in the Philippines.

A

The Board’s overall function

62
Q

This mainly includes supervision of the licensure examination and the professional’s registration, review of the practices adopted by auditors, ensuring compliance of academic institutions to the requirements prescribed by CHED in coordination with the Board, and punishment to violators of the Accountancy Act and its rules and regulations.

A

The Professional Regulatory
Board of Accountancy

63
Q

the accredited national professional organization of CPAs by the PRC

A

the Philippine Institute of Certified Public Accountants

64
Q

is a registered non-stock corporation divided into geographical divisions which are subdivided into regional divisions further subdivided into chapters which handles membership within the
chapter’s area/location.

A

PICPA

65
Q
  • To promote and maintain high professional and ethical standards among accountants.
  • To advance the science of accounting.
  • To develop and improve accountancy education.
  • To encourage cordial relations among accountants, and
  • To protect the Certificate of Certified Public Accountant granted by the Republic of the Philippines
A

The objectives of PICPA

66
Q

Sectors of the Accounting Profession

A
  1. Public Practice
  2. Commerce and Industry
  3. Education / Academe
  4. Government
67
Q

a. Audit Service
b. Design, installation, and revision of accounting system; or
c. Preparation of income tax returns when related to accounting procedures.
d. represents clients before government agencies on tax and other matters related to accounting.

A

Public Practice

68
Q

Accredited by the PRC and the Board of Accountancy renewable every three years. The CPA-applicant shall provide a proof that he/she had at
least 3 years meaningful experience in any of the areas of the accountancy profession before being issued with a Certificate of Accreditation.

A

Government

ConceptuaL Framework and Accounting Standards (4 decks)

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